States Plead Case for VoIP Regulation

WASHINGTON — Voice over Internet Protocol telephony should be classified as a telecommunications service if it originates and terminates on the public switched telephone network (PSTN), the chief spokesman for state public utility commissioners told a Senate committee Tuesday.

“The consensus [of utility commissioners] is that public interest obligations of a service derive from the functional nature of that service, not from the technology used to deliver it,” Stan Wise, president of the National Association of Regulatory Utility Commissioners, told the Senate Commerce Committee.

State regulators are concerned that the Federal Communications Commission (FCC), which is examining the appropriate regulatory framework for VoIP, will rule all Internet telephony is an interstate information service no different than applications like e-mail. Such a ruling would put VoIP beyond the taxing and regulatory reach of the states.

Two weeks ago, the FCC decided VoIP pioneer Jeff Pulver’s Free World Dialup (FWD) business does not meet the definition of a telecommunications service and is free from FCC regulations. FWD requires members to buy special equipment and have a broadband connection to talk with each other computer-to-computer. Beyond the equipment, there are no fees and the free calls are routed entirely over the Internet.

Unlike FWD, most VoIP providers route calls from leased local telephone lines to a gateway server that converts analog voice into data packets. From there, the data packets move over the public Internet or a private backbone to its destination, where it goes through another gateway, rolling over to a local line.

While VoIP is clearly a phone service, providers say they shouldn’t be regulated in the same manner as PSTN telephone carriers since they don’t traffic in voice packets. The FCC proceeding is expected to last at least a year.

“Consumers have certain expectations to today’s phone systems, including ubiquitous, reliable service, a minimum level of service quality, advance notice before termination and important features like E911,” Wise said.

Wise noted that consumers using “pure VoIP” services like FWD are likely to also have a landline phone.

“Whether we realize it or not, we build our lives around a reliable telephone system,” Wise testified. “If a babysitter, God forbid, has to call 911, she’ll need a reliable dial tone, clear service and effective routing to the nearest public safety answering point, and the local ambulance dispatcher will want to know where she is, even if she can’t give the directions.”

Wise said VoIP industry groups are “stepping up to the plate” on a number of public safety issues involving Internet telephony, but the “public interest obligations of the telecom system are serious enough to require continued governmental oversight and, when necessary, enforcement.”

Telecom technology analyst Kevin Werbach told the senators that while VoIP raises “thorny policy issues,” it should not be classified as a telecommunications carrier.

“Application of legacy regulation to VoIP would do more than just stifle innovation in new competitive phone services. It would cast a pall of uncertainty over the entire technology sector,” Werbach said. “Would Microsoft be subject to those obligations for its Xbox Live online gaming chat service? Would a software provider that sells a VoIP softphone client to run on a handheld PocketPC or Palm device?”

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